INM shares decline 5% on ODCE probe news, writes Eamon Quinn.
Shares in Independent News and Media (INM) closed 5% lower yesterday as analysts scrambled to assess the potential cost to INM following a High Court application by corporate watchdog, the Office of the Director of Corporate Enforcement (ODCE) to have an inspector appointed to investigate the media firm.
The shares have now lost a quarter of their value since a row blew up over a proposed takeover of broadcaster Newstalk in late 2016.
Analysts say the renewed shares slide shows the extent of the uncertainty over the potential costs if INM fails in its bid to persuade the courts at the first hearing on April 16.
The ODCE has only once before appointed an inspector to a firm since it was set up around 16 years ago. The Companies Act says the “court may appoint one or more competent inspectors to investigate the affairs of a company” following an application by the ODCE.
Former INM chief executive Robert Pitt, who stepped down last October, had used whistleblowing legislation to complain as a dispute inside the media firm raged over the price of the proposed Newstalk acquisition. He had clashed with former chairman Leslie Buckley, who has also stepped down from INM.
Denis O’Brien is a significant shareholder in INM and is the founder of Communicorp, which owns Newstalk. The news that the chief executive used whistleblowing legislation raised the heat over the controversy and showed the seriousness of the row.
INM disclosed last year that the ODCE had asked it for documents involving plans it had to acquire Newstalk. At the end of last year, the media firm had over €91m in cash, which accounted for well over half its current market value of €128.9m, and had assets, net of its pension liability, of €76m.
Philip O’Sullivan, chief economist at Investec Ireland, said the balance sheet was sufficient to hold up the share price although the potential appointment of an inspector will take up a lot of time for the new board.
Earlier this month, INM confirmed former Telegraph Media Group chief Murdoch MacLennan as its non-executive chairman.
Analyst Rachel Fox at Goodbody said it was hard at this stage to estimate the costs from the ODCE investigation could entail because the appointment of an inspector if it were to happen, “is a rare event”.
She said she would await developments before assessing whether to downgrade her 2018 earnings forecast.